Kerala High Court
K.B. Arun vs The Intelligence Officer on 21 February, 2025
2025:KER:15368
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE HARISANKAR V. MENON
FRIDAY, THE 21ST DAY OF FEBRUARY 2025 / 2ND PHALGUNA, 1946
WP(C) NO. 15530 OF 2019
PETITIONER:
K.B. ARUN, AGED 49 YEARS,
PROPRIETOR, PRIME BUILDERS AND DEVELOPERS,
34/1509-G, THAYANKERY BUILDINGS, MARKET ROAD,
EDAPPALLY, ERNAKULAM DISTRICT, PIN-682024
BY ADV R.MURALEEDHARAN
RESPONDENTS:
1 THE INTELLIGENCE OFFICER,
SQUAD NO.VIII, DEPARTMENT OF COMMERCIAL TAXES,
ERNAKULAM, COCHIN, PIN-682015
2 STATE OF KERALA,
REPRESENTED BY THE SECRETARY TO GOVERNMENT,
TAXES DEPARTMENT, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM, PIN-695001
BY ADV SRI.ARUN AJAY SANKAR- GP
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 21.02.2025, ALONG WITH WP(C).15998/2019, THE COURT ON THE
SAME DAY DELIVERED THE FOLLOWING:
W.P.(C)Nos.15530 &
15998 of 2019 2 2025:KER:15368
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE HARISANKAR V. MENON
FRIDAY, THE 21ST DAY OF FEBRUARY 2025 / 2ND PHALGUNA, 1946
WP(C) NO. 15998 OF 2019
PETITIONER:
K.B. ARUN, AGED 49 YEARS,
PROPRIETOR, PRIME BUILDERS AND DEVELOPERS,
34/1509-G, THAYANKERY BUILDINGS, MARKET ROAD,
EDAPALLY, ERNAKULAM DISTRICT, PIN-682024.
RESPONDENTS:
1 THE INTELLIGENCE OFFICER,
SQUAD NO. VIII, DEPARTMENT OF COMMERCIAL TAXES,
ERNAKULAM, COCHIN, PIN-682015.
2 STATE OF KERALA,
REPRESENTED BY THE SECRETARY TO GOVERNMENT,
TAXES DEPARTMENT, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM, PIN-695001.
BY ADV SRI.ARUN AJAY SANKAR- GP
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 21.02.2025, ALONG WITH WP(C).15530/2019, THE COURT ON THE
SAME DAY DELIVERED THE FOLLOWING:
W.P.(C)Nos.15530 &
15998 of 2019 3 2025:KER:15368
JUDGMENT
[WP(C) Nos.15530/2019, 15998/2019]
These two writ petitions are filed by an assessee
under the provisions of the Kerala Value Added Tax Act,
2003, challenging the imposition of penalty under Section 67
(1) of the Act on the ground of limitation. W.P.(C)No.15530
of 2019 is filed challenging Exts.P1 and P2 orders of penalty
issued by the 1st respondent therein for the years 2007-08
and 2008-09, whereas W.P.(C)No.15998 of 2019 is filed
challenging the penalty orders for the years 2009-10 and
2010-11.
2. I have heard Sri.R.Muraleedharan, the
learned counsel for the petitioners and Sri.Arun Ajay
Shankar, the learned Government Pleader for the
respondents herein.
3. Facts are not in dispute. The petitioner is
stated to be a works Contractor engaged in execution of sub-
contracts on behalf of the registered Works Contractors. The
petitioner states that he has compounded the liability
W.P.(C)Nos.15530 &
15998 of 2019 4 2025:KER:15368
payable under Section 8 of the Act, having satisfied the tax
payable without any fail. An inspection was carried out in
the residential premises of the petitioner on 26.08.2013,
leading to the seizure of various documents. However, the
show cause notice for imposition of penalty under Section
67(1) is seen issued only on 22.12.2018, followed with the
impugned orders of penalty dated 29.03.2019. It is with
reference to the afore dates, the learned counsel,
Sri. R.Muraleedharan contends that the proceedings are
barred by limitation.
4. Section 67(1) of the Act originally provided
for completion of the entire proceedings including the
imposition of penalty within a period of one/three years from
"date of detection of the offence". From 01.04.2014, the
period of limitation itself was omitted in toto by the Finance
Act, 2014.
5. In the case at hand, the assessment years
are pertaining to 2007-08 to 2010-2011, when the period of
limitation prescribed was three years for finalisation of the
W.P.(C)Nos.15530 &
15998 of 2019 5 2025:KER:15368
proceedings.
6. A Division Bench of this Court in Acme
Furniture & Interiors (M/s.) v. Commercial Tax Officer
(WC & LT), Ernakulam [2009 KHC 7340] had considered
a challenge against an imposition of penalty under Section
67(1), on the ground of limitation specified thereunder. The
Division Bench of this Court, noticed that the statute
provides for disposal of the case within a period of one year
originally and three years subsequently from the date of
detection of the offence. The assessee contended that since
the books of accounts have been verified by the Officer, the
proceedings ought to be either with reference to the date of
inspection or the date of verification of the books of
accounts. The Division Bench in paragraph 3 of the
judgment found that the provisions of the statute does not
visualise the assessing authority to verify the records after
the inspection, within a particular period of time. Even then,
the Division Bench found that the verification has to be
carried out within a reasonable period of time from the date
W.P.(C)Nos.15530 &
15998 of 2019 6 2025:KER:15368
of search. With reference to the date of inspection, date of
verification of the books of the accounts and the subsequent
issue of show cause notice, the Division Bench of this Court
found in that case, there was no limitation as contended.
7. However, the afore judgment is an authority
for the proposition that, even in a situation where a search is
carried out, the authority under Section 67 is duty bound to
carry out the verification within a reasonable period of time
and since the notice to levy penalty.
8. A learned Single Judge of this Court in
St.George Electricals & Contractors v. Department of
Commercial Taxes [2017 (4) KLT 1006] has considered
the question as to what is reasonable period of time, from
the date of search for carrying out verification of books of
accounts, in the backdrop of the principles laid down by the
Division Bench in Acme (supra). This Court after referring
to the principles laid down by the Division Bench of this
Court, found that the books of accounts in that case was
verified on 11.05.2010 and the show cause notice was issued
W.P.(C)Nos.15530 &
15998 of 2019 7 2025:KER:15368
only on 22.05.2013 - with a delay of nearly two years. On
that basis, the Single Bench found that the orders of penalty
impugned were barred by limitation and quashed the same.
9. It is with reference to the principles laid
down in the afore judgments, the contentions raised by the
petitioners in these cases have to be evaluated.
10. The inspection was admittedly on
26.08.2013, leading to the seizure of various items. The last
notice directing production of books of accounts etc., is seen
issued by the authority under the statute on 03.08.2016.
True, the petitioner did not respond to the said notice.
However, the authority did not proceed by treating the
petitioner ex-parte accordingly and instead he waited for
almost two years and four months to initiate further
proceedings in that regard by issuing the show cause notice
under the provisions of Section 67(1) on 22.12.2018. In
other words, with reference to the date of notice seeking
production of books of accounts etc., the show cause notice
has been issued with a delay as noticed above.
W.P.(C)Nos.15530 &
15998 of 2019 8 2025:KER:15368
11. The decisions of this Court referred to above,
mandate the authority to proceed either with reference to
the production of books of accounts or with reference to the
show cause notice within "reasonable period of time".
Insofar as the period of delay of two years and four months
as above, cannot be considered to be reasonable, I am of the
opinion that the subsequent completion of the entire
proceedings by the impugned orders are barred by
limitation.
12. I also take note of the contention of the
learned Government pleader that the period of limitation
itself has been taken away w.e.f. 01.04.2014. It is settled
principles of law that even in such a situation, the
proceedings have to be commenced and finalised within a
reasonable period of time as held by the Apex Court in
followed by this Court in State of Punjab and Others v.
Bhatinda District Co-operative Milk Producers Union
Ltd. [(2007) 11 SCC 363] and this Court in MCP
Enterprises (M/s.) and Others v. State of Kerala and
W.P.(C)Nos.15530 &
15998 of 2019 9 2025:KER:15368
Others [2020 (1) KHC 127].
13. On the whole, I am of the opinion that the
proceedings challenged in these writ petitions are barred by
limitation.
Resultantly, these writ petitions would stand allowed
by setting aside the impugned orders of penalty issued by he
1st respondent.
Sd/-
HARISANKAR V. MENON
JUDGE
ANA
W.P.(C)Nos.15530 &
15998 of 2019 10 2025:KER:15368
APPENDIX OF WP(C) 15530/2019
PETITIONER EXHIBITS
EXHIBIT P1 TRUE COPY OF THE PENALTY ORDER PASSED BY
THE 1ST RESPONDENT UNDER S.67(1), DATED
29/03/2019 FOR 2007-2008.
EXHIBIT P2 TRUE COPY OF THE PENALTY ORDER PASSED BY
THE 1ST RESPONDENT UNDER S.67(I), DATED
29/03/2019 FOR 2008-2009.
RESPONDENT EXHIBITS
EXHIBIT-R1(A) TRUE COPY OF THE NOTICE DATED 22/12/2018
PROPOSING TO IMPOSE PENALTY OF
RS.564130/- FOR THE YEAR 2007-2008
EXHIBIT-R1(B) TRUE COPY OF THE NOTICE DATED 22/12/2018
PROPOSING TO IMPOSE PENALTY OF
RS.13892444 FOR THE YEAR 2008-09
EXHIBIT-R1(C) TRUE COPY OF THE ADJOURNMENT APPLICATION
DATED 14/02/2019
EXHIBIT-R1(E) TRUE COPY OF THE ADJOURNMENT APPLICATION
DATED 26/03/2019
W.P.(C)Nos.15530 &
15998 of 2019 11 2025:KER:15368
APPENDIX OF WP(C) 15998/2019
PETITIONER EXHIBITS
EXHIBIT P1 TRUE COPY OF THE PENALTY ORDER PASSED BY
THE 1ST RESPONDENT UNDER S 67(1) DATED
29.3.2019 FOR 2009-2010
EXHIBIT P2 TRUE COPY OF THE PENALTY ORDER PASSED BY
THE 1ST RESPONDENT UNDER S.67(1) DATED
29.3.2019 FOR 2010-2011
RESPONDENT EXHIBITS
EXHIBIT-R1(A) TRUE COPY OF THE NOTICE DATED 22/12/2018
PROPOSING TO IMPOSE PENALTY OF
RS.564130/- FOR THE YEAR 2007-2008
EXHIBIT-R1(B) TRUE COPY OF THE NOTICE DATED 22/12/2018
PROPOSING TO IMPOSE PENALTY OF
RS.13892444 FOR THE YEAR 2008-09
EXHIBIT-R1(C) TRUE COPY OF THE ADJOURNMENT APPLICATION
DATED 14/02/2019
EXHIBIT-R1(E) TRUE COPY OF THE ADJOURNMENT APPLICATION
DATED 26/03/2019
